Bonus Tax

[Liz8715]

Hi - both my husband and I received bonuses from our employers in 2019. The amount was paid separately, outside of the standard cycle and was not included in our regular paycheck. Based on what I've read, this should be subject to 22% flat tax starting last year. However, both of our employers added the bonus to our W2 and it is reported in box 1. Is this appropriate? Are there any options for pulling this out so it could be taxed separately?

[Opus 17]

The bonus is properly included in your W-2 wages. You must report and pay tax on all your income for the year, and your ultimate tax that you owe for the year depends on all your income plus all your deductions and credits.

The special rules for withholding on bonuses only determine how the employer should calculate the tax to withhold is  than their normal check due to a bonus.  That doesn’t change the fact that a taxpayer must report all their income on the tax return and the total tax is calculated from their total income as usual,

[Liz8715]

Thank you. So the bonus withholding is more about allowing individuals to receive a greater bonus check, and doesn't actually reduce tax liability? 

[Opus 17]

Correct. You always calculate your income tax based on your total income. Without the special rules for bonus withholding, most people who get bonuses would have too much taken out at the time. They would of course then get a larger refund, but the special rules allow them to keep more of the bonus up front.